Economically, this is “the big one” (Headlines from the Meltdown)

Jolted by global recession fears, the Federal Reserve slashed interest rates Tuesday, and President Bush and leaders of Congress joined in a rare show of cooperation in promising urgent action to pump up the economy with upwards of $150 billion in tax cuts and government spending.

Market meltdowns overnight around the globe and growing anxiety at home stirred lawmakers and the administration toward swift action, possibly within a few weeks. Wall Street plummeted as the day began, following Asian stocks, then warily eased its sell-off after the Fed ordered the biggest cut on record in a key interest rate. The Dow Jones industrials, down 465 points at one point, closed the day off 128.

….”The urgency that we feel at home is now even more urgent as we see the impact of our markets on others,” House Speaker Nancy Pelosi said after both Democratic and Republican lawmakers met with Bush at the White House.

Billionaire investor George Soros said the world was facing the worst financial crisis since World War Two and the United States was threatened with recession, according to an interview with the Austrian daily Standard.

“The situation is much more serious than any other financial crisis since the end of World War Two,” Soros was quoted as saying.

Slower consumer spending and rising unemployment – traditional harbingers of an economic downturn – are unlikely to drastically reduce energy prices. Oil isn’t expected to fall below $60 a barrel from its current level of $90 and gasoline should bottom out around $2.30-2.50 a gallon from around $3 currently, experts say.

“That’s the floor, even in a global recession,” said Simon Wardell, an oil analyst at consulting group Global Insight. “The overall balance is going to remain pretty tight.”

On Monday, fears of a US recession spilled over into Asian markets sending stocks tumbling. Indexes were hammered across the board in what turned out to be the worst day of trading since 2001.

….The huge sell-off is a sign that global investors do not believe that the Fed’s rate cuts or President Bush’s $150 billion “stimulus package” can revive the flagging economy or breathe new life into the over-extended US consumer. After Monday’s sharp downturn, the prospects for averting a deep and protracted recession are slim to none.

The current crisis could well turn out to be the most devastating since the Great Depression. It manifests profound, unresolved problems in the real economy that have been — literally — papered over by debt for decades, as well as a shorter term financial crunch of a depth unseen since World War II. The combination of the weakness of underlying capital accumulation and the meltdown of the banking system is what’s made the downward slide so intractable for policymakers and its potential for disaster so serious. The plague of foreclosures and abandoned homes — often broken into and stripped clean of everything, including copper wiring — stalks Detroit in particular, and other Midwest cities.

The sad truth is: We’re all selling our souls to the “company store.” Not just the boardroom “suits” (the greedy CEOs getting hundred million dollar severance packages, and all the greedy directors now selling equity to foreign nations to cover up their gross negligence). No, today everybody is selling their soul, everybody secretly wants to become a millionaire and retire rich. And the media panders to this darker side.

….Supercapitalism is killing American democracy. So we substitute MySpace, Facebook, iPods, videogames, game shows and insignificant egocentric communities for our rights as American citizens, while still working in the “coalmines.” Worse yet, political rhetoric aside, we really don’t expect change.

….Oh, stop denying it! The glue binding all Americans, rich or poor, is self-interested greed, pure Adam Smith economics. We all want more, we want it now, and more is never enough. Hidden just below the surface of the new supercapitalism is a dark Faustian bargain: We’re all trapped by our addiction to more, as investors and consumers we’ve bargained away our soul.

Until a few months ago, it was accepted wisdom that the American economy functioned far more smoothly than in the past. Economic expansions lasted longer, and recessions were both shorter and milder. Inflation had been tamed. The spreading of financial risk, across institutions and around the world, had reduced the odds of a crisis.

Back in 2004, Ben Bernanke, then a Federal Reserve governor, borrowed a phrase from an academic research paper to give these happy developments a name: “the great moderation.”

These days, though, the great moderation isn’t looking quite so great — or so moderate.

The recent financial turmoil has many causes, but they are tied to a basic fear that some of the economic successes of the last generation may yet turn out to be a mirage.

….The great moderation now seems to have depended — in part — on a huge speculative bubble, first in stocks and then real estate, that hid the economy’s rough edges. Everyone from first-time home buyers to Wall Street chief executives made bets they did not fully understand, and then spent money as if those bets couldn’t go bad. For the past 16 years, American consumers have increased their overall spending every single quarter, which is almost twice as long as any previous streak.

Americans have shouldered this patriotic duty [to shop their way out of national economic troubles] for at least seven years. But whether they’re still up to the task remains to be seen.Many U.S. consumers are tapped out — over-mortgaged and over-borrowed with no savings to fall back on. The homes that helped finance their spending sprees are now falling in value, and higher food and energy costs are digging deeper into their wallets daily. Increasingly, they’re falling behind on mortgage and car payments as well as credit card bills.

But there’s something more, and it’s new, said Jerrold Peterson, economics professor emeritus at the University of Minnesota at Duluth. It’s fear.

“For every one mortgage foreclosure there are four of us saying, ‘There but for the grace of God go I,'” Peterson said.

Federal Reserve officials, responding to the risk that plunging stock markets around the world posed for U.S. economic growth, cut the benchmark interest rate by 75 basis points. The Fed’s unexpected action carries its own risk –that investors may be spooked even more by a hint of panic at the central bank.

“This extraordinary action was excessive and smells of fear,” said economist Willem Buiter, a professor at the London School of Economics and Political Science and a former member of the Bank of England’s Monetary Policy Committee.

“It is the clearest example of monetary policy panic football I have witnessed in more than 30 years as a professional economist,” Buiter said in an Internet posting yesterday.

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About Matt Cardin

Teeming Brain founder and editor Matt Cardin is the author of DARK AWAKENINGS, DIVINATIONS OF THE DEEP, A COURSE IN DEMONIC CREATIVITY: A WRITER'S GUIDE TO THE INNER GENIUS, and the forthcoming TO ROUSE LEVIATHAN. He is also the editor of BORN TO FEAR: INTERVIEWS WITH THOMAS LIGOTTI and the academic encyclopedias MUMMIES AROUND THE WORLD; GHOSTS, SPIRITS, AND PSYCHICS: THE PARANORMAL FROM ALCHEMY TO ZOMBIES; and HORROR LITERATURE THROUGH HISTORY.

About

The Teeming Brain explores news, trends, and developments in religion, horror, science fiction, fantasy, the paranormal, creativity, consciousness, and culture. It also tracks apocalyptic and dystopian trends in science, technology, politics, ecology, economics, the media, the arts, education, and society at large. Its founder and primary author is Matt Cardin.

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Praise for the Teem

FOR MATT CARDIN:

"[Dark Awakenings is] a thinking-man's book of the macabre...Cardin's tales are rich with references to Lovecraft, Nietzsche, and other writers whose work gives them unusual philosophic depth." – Publishers Weekly

“It’s a bold writer who, in this day and age, tries to make modern horror fiction out of theology, but Cardin pulls it off.” – Darrell Schweitzer

“In the tradition of Poe and Lovecraft, Cardin's accomplishments as a writer are paralleled by his expertise as a literary critic and theorist.” – Thomas Ligotti

“Matt Cardin is one of those rare horror authors who is also a true scholar and intellectual.” – Jack Haringa

FOR RICHARD GAVIN:

"Literate horror fans who have yet to encounter Canadian author Richard Gavin are in for a treat. The lyrical prose is often at a higher level than usual presentations of otherworldly demons and malevolent forces." – Publishers Weekly

"Richard Gavin is one of the bright new stars in contemporary weird fiction. His richly textured style, deft character portrayal, and powerful horrific conceptions make every one of his tales a pleasure to read." – S. T. Joshi

"Gavin's storytelling can be masterly. As with Machen and Blackwood at their best, an epiphany or illumination is achieved, though Gavin's mysticism is darker and distinctly his own." – Wormwood

FOR STUART YOUNG:

"No one can accuse Stuart Young of avoiding the big issues -- with insight and verve, he tackles head-on the existence of God, the mystery of human consciousness and the transformative effects of psychedelic drugs." – Mark Chadbourne